There are two situations of the prices of agricultural products rise, one is the rise at the background that the demand and supply is balanced, the other is the shortage of supply causes price rise, and the increase is substantial.
The demand for agricultural products is rigid. At present, economy is recovering but unsteadily. Consumption is still controlled. When the micro-economy steps to a new growth stage, the consumption will rise rapidly and continuously.
Due to a large population and relative shortage of resources, agricultural products supply is certainly facing huge pressure that consequently causes the price rise. In future, the prices of Chinese agricultural products are likely to reach the level in Korea and Japan. Of course, with economy developing and income increasing, people could accept higher prices.
In recent, prices of certain non-staple agricultural products such as garlic and green beans rise dramatically. Although non-staple varieties can not impact the overall market, we should avoid it driving prices of other varieties rise. Chinese government is doing effort to investigate and prosecute market hoarding and cornering. But actually, to avoid price soar or slump, it requires effective prealarm which is much better than interference afterwards.
Considering micro-economy and people’s life, the government shall pay high attention to staple agricultural products such as wheat and maize. In these varieties, the supply of cotton and sugar is short, which prices have risen greatly in recent. The supply of maize and wheat is sufficient so far but probably short in future.
Impacted by natural disasters, Chinese wheat yield reduces slightly and the quality falls in this year. Quality fall also could lead the reduction of active supply. Therefore, importing is necessary. Also, with the development of western food and baking industry in China, the demand for high-end wheat products will increase that means 2-3 million tons import volume annually.
As for the price rise driving CPI index, we think the concern is a little too much. As a country developing with two-digit rate, we could raise warning level over 3%. The current level 3% is not suitable for Chinese status and puts over pressure on market. Once prices of certain products rebound after over controlled, it is quite difficult to control again and will impact on the market and CPI seriously. Therefore, less control to CPI index going up could enable prices of agricultural products to rise properly and steadily which is more beneficial to economy and people’s life.
